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Ponzi Schemes

October 1, 2013 0 Comments


What is a Ponzi Scheme?

Charles Ponzi is infamous for scamming people. It is for this reason that fake schemes are often named after him. Ponzi would collect money from individuals in the name of investing in his own business. He would then pay investors high interest payments using the money obtained from new investors.

This type of investment fraud was one of the first and possibly due to its simplicity soon gained immense popularity with scammers.

Today, there are many variations of the Ponzi schemes, but they can be pretty hard to identify. Many people have continually fallen victim to these financial entrapments. The schemes lead to huge financial losses to the unsuspecting interested investors.

This makes it very important to be skeptical about any investment opportunity that is being sold to you. This should include anything that a family member or friend is trying to get you into. When you are cautious enough to conduct a research, you will be sure about what exactly you are betting your money on.  A few steps can help you in recognizing and avoiding a Ponzi scheme.

Check out Credentials

A background check of the individual approaching you with the investment idea is paramount in identifying a Ponzi scheme. You can look up the company details including registration and the years of existence. Brokers usually have business numbers and you can check them to see their records. It is a simple way to avoid being trapped by fraudulent schemes.

Use an Attorney

A contract is the most important document in any transaction or agreement. Since you might not be very familiar with everything entailing a contract, an attorney will help with the evaluation. It is important to avoid any transaction until your attorney has analyzed the contracts and given you the go ahead. A good attorney will pick anything fishy from the deal saving you lots of disappointments.

Be Cautious with Custodians

A broker who maintains investment accounts is referred to as a custodian. In a case where you are asked to direct a cheque in his name, you can be reasonably assured that something is wrong with the deal. A good deal will require you to direct a cheque to the rightful and legitimate custodial firm and not an individual.

Understand the Investment

Conmen (and women) are very clever with their words and investment explanations. You therefore need to be very careful in understanding the investment and how it works. If it appears too complicated for you to understand or if you feel it is being explained in a rush, then it could be a fake. You should only hand your money over when you are completely sure about the investment and how it will work for you.

Trust your Instincts

As soon as you feel uncomfortable about an investment idea being sold to you, walk away. When you feel something is wrong, then chances are that something is truly wrong. Many people fall victims to the Ponzi schemes for ignoring their first instincts. Always trust your gut feeling when making an investment.

Indonesia Private Investigation Agency (IPIA) and our sister agency  Bali Eye Private Investigation Agency (BEPIA) are fully registered Private Investigation Agencies offering private detective and private investigator services to the Private and Business sectors throughout Indonesia and South East Asia.



About the Author:

BEPIA's Indonesian Director of Investigations has worked on and directed over 400 cases. She has a Diploma (with distinction) in Private Investigation from the UK, and an Australian Government accredited certificate in Investigative Services.